2025 (7) TMI 1721 - AT - IBC

Section 9 IBC Petition Dismissed Due to Limitation and Pre-Existing Dispute Evidence

M/s. Shrushti Contech Private Limited Versus M/s. VA Tech Wabag Limited

The NCLAT upheld the dismissal of the Section 9 IBC petition on grounds of limitation and existence of a pre-existing dispute. The tribunal found the ... Applicability of time limitation for application filed u/s 9 of IBC - existence of pre-existing dispute or not - absence of other supporting corresponding document on record to establish the settlement - HELD THAT:- The Learned Tribunal in the impugned order has clearly recorded that there is a pre-existing dispute, which is evident from the two stages of settlement, which were being attempted to be arrived at that is on 08.03.2017 & 13.06.2019, that the alleged settlement of 13.06.2019 is shown in a document that is unauthenticated, that the arbitration process, is being conducted, by the Hon’ble Supreme Court with respect to the dispute in respect of the receivables from TSGENCO, by appointing sole arbitrator, that in the annual report of the Corporate Debtor, the amount in respect of trade bills is shown to have been disputed and that Record of Default report from NeSL shows the status of ‘Default” as disputed all of which point to a pre-existing dispute. Regarding the aspect of limitation, Learned Adjudicating Authority has held that the date of default, which has been mentioned in the notice issued under Section 8 of I & B Code, will have to be taken as a date of default which cannot be altered, that therefore date of default will be 01.05.2016, that letter sent by statutory auditor merely asked for balance confirmation from the Operational Creditor, that the alleged final settlement of 2019 is not authenticated by Corporate Debtor, that limitation period expired on 30.04.2019 and the alleged acknowledgement in form of settlement dated 13.06.2019 and the alleged balance sheet entries are all beyond the said limitation period and the petition has to be taken as to have been filed beyond the limitation period. The reason which has been assigned in the Impugned Order dismissing the petition under Section 9 of I & B Code because of the aspect of limitation and existence of the pre-existing dispute, since being an admitted fact, which stood established by the documents which were brought on record and more particularly, because of the admission made by the Appellant himself in the proceedings before the Learned Adjudicating Authority, there is no anomaly or any perversity in the Impugned Order which could call for any interference. Appeal dismissed. ISSUES: Whether the claim under Section 9 of the Insolvency and Bankruptcy Code (I&B Code) is barred by limitation.Whether there exists a pre-existing dispute that bars maintainability of the Section 9 application.Whether acknowledgment of debt by the Corporate Debtor in correspondence or statutory auditor reports affects the limitation period.Whether procedural anomalies related to registration and numbering of the Company Petition affect the validity of the adjudication.Whether the adjudicating authority erred in rejecting the Section 9 application without properly considering documentary evidence of acknowledgment and settlement. RULINGS / HOLDINGS: The claim under Section 9 of the I&B Code was held to be barred by limitation, with the date of default fixed as 01.05.2016 as per the demand notices, which cannot be altered.The existence of a pre-existing dispute was established based on attempted settlements, arbitration proceedings, disputed trade bills in the Corporate Debtor's annual report, and status of default marked as 'disputed' in the Record of Default report, rendering the Section 9 application not maintainable.The acknowledgment of debt in the form of balance confirmations and statutory auditor reports was held to be insufficient to shift the date of default beyond 01.05.2016, as these were beyond the limitation period and did not constitute valid acknowledgment for limitation purposes.The procedural anomaly concerning the assignment of a diary number and later regular Company Petition number was held to be a minor procedural issue that does not vitiate the merits-based decision of the adjudicating authority.The adjudicating authority did not err in dismissing the application under Section 9 on grounds of limitation and pre-existing dispute, as the appellant failed to place authenticated documents establishing settlement or acknowledgment within limitation, and the authority properly considered the available evidence. RATIONALE: The Court applied the statutory framework of the Insolvency and Bankruptcy Code, particularly Section 9, and the rules regarding limitation and pre-existing disputes under the Code.The principle that the date of default mentioned in the demand notice under Section 8 is the starting point for limitation was reaffirmed, and that this date cannot be shifted unless there is valid acknowledgment of debt within the limitation period supported by documentary evidence.The Court relied on established precedents holding that mere correspondence or unauthenticated documents do not constitute acknowledgment sufficient to extend limitation.The presence of a pre-existing dispute was supported by multiple factors including attempted settlements, ongoing arbitration, disputed trade bills, and the status of default as 'disputed' in official records, which bars maintainability of a Section 9 application.The procedural irregularity concerning petition numbering was treated as a minor technicality, not affecting the substantive adjudication on merits.The Court emphasized that the adjudicating authority's decision was based on proper appreciation of facts and evidence on record, and absence of findings on the appellant's documents was due to lack of their evidentiary value or authenticity.